Investment and advisory firm principals often ask how much of their overall budget should be allocated to marketing. While there is no magic number, the first variable in answering this question is: “How much do you want to grow the business over the next one, three and five years?”
If the answer is, “I want things to stay about the same,” a lower number may be perfectly appropriate. On the other hand, if you’d like to significantly increase both assets and client engagement, a greater investment in marketing can lead to big results.
When it comes to setting a marketing budget, most companies arrive at this number as a percentage of revenue. According to a recent study published by Investment News, the “average” asset management firm spends about 2 percent of revenue on marketing. By comparison, the “fastest growing” firms spend upwards of 6 percent. And while that number is three times higher, it still pales in comparison to the 11 percent of revenue spent on marketing by firms across all major industries, as measured by Gartner, the global research firm.
It goes without saying that any amount of money put toward ineffective marketing will largely be wasted. But dollars invested in a well-planned and carefully executed strategic marketing initiative are likely to be dwarfed by the return on investment. At least that’s the conclusion of a recent study by Broadridge, which revealed that advisory firms putting more dollars into marketing attracted nearly three times as many new clients over the previous 12 months as their lesser spending competitors. Broadridge also determined that marketing is one of the largest expenditures for successful wealth management firms, with most of those surveyed planning to increase spending on social media, webinars, digital advertising, events and other marketing activities over the next year.
With all the competition in the investment and advice industry today, impactful branding and marketing are critical requirements for gaining market share and achieving brand awareness. While boutique investment firms, in particular, are sometimes hesitant to invest heavily in marketing — believing strong performance alone will be enough for clients to find them — it’s increasingly clear this strategy is not effective in today’s fast-changing and extremely competitive world.
Indeed, pairing excellent investment results with a comprehensive, well-executed strategic marketing and communications program is the magic combination that brings with it the best potential for both retaining current clients and generating significant new asset growth.
